Amendment is designed to probe why charities which haven’t made a successful Gift Aid exemption claim in at least three of the previous seven tax years shouldn’t be eligible for a payment under this Bill. It would also allow a debate on why charities recently started shouldn’t be eligible.
Amendment 20, in clause 2, page 2, line 22, leave out paragraph (a).
I am grateful to have the opportunity to serve again under your chairmanship, Mr Robertson. I will, if I may, gently encourage you to look out for attempted intimidation by the Government Whip and protect those of us on the Opposition Benches, with all the odds stacked against us in these debates.
I am delighted to hear you give that guidance, Mr Robertson, and I thank you for it.
Just before we broke for lunch, I had highlighted the evidence from the National Council for Voluntary Organisations, raising the concerns of some of the smaller organisations that are its members about the requirement for three years of gift aid claims to have been made before a charity might be eligible under this small grants scheme from the Treasury. They were the Telford and Wrekin Senior Citizens’ Forum, the Wiltshire Rural Music School, Cumbria Action for Sustainability and Southside Young Leaders’ Academy.
I hoped that the concerns of the Telford and Wrekin Senior Citizens’ Forum might appeal to the hon. Member for Banbury such that he would want to participate in the raising of concerns with the Minister about this harsh, restrictive part of the eligibility criteria. The hon. Gentleman is not in his place, but perhaps the Minister will want to reflect on a similar organisation in his constituency. I do not know whether there is a Bromsgrove and Worcester senior citizens forum. Let us imagine that the organisation to which I am referring has not put in for gift aid. The event that he is proposing to organise in January successfully persuades it to put in for gift aid. Nevertheless, under this clause, that senior citizens group will not benefit at all from this scheme for at least three years.
I look to the hon. Member for Stafford, whom I suspect has the most sophistication and interest in musical things of Government Members, to be able to share the sense of concern that the Wiltshire Rural Music School might have. I do not know whether there is a Stafford rural music school, but let us imagine the situation that the Wiltshire Rural Music School is in and how it feels. It is not yet registered for gift aid and is worried about the three-year funding rule. Potentially, a very good organisation stands to lose out under this scheme. He surely will be able to recognise that that is not a unique experience and problem.
I am indeed passionate about music, and there is a fine Staffordshire young musicians charity, which is already registered for gift aid if I am not mistaken and of which I think I am a member, although perhaps I owe it this year’s subscription, so I thank the hon. Gentleman for reminding me to renew my subscription.
I am grateful to have the opportunity to be helpful to the hon. Gentleman. I hope that he will be helpful to organisations such as the Wiltshire Rural Music School by raising its concerns, as well as his concerns, with the Minister about the three-year rule.
Cumbria Action for Sustainability has raised concerns, but perhaps the hon. Member for Brentford and Isleworth will want to wonder whether there could be a Brentford action for sustainability that is similarly worried about the three-year funding rule—a charity that might be an ally in her fight with the Treasury about a third runway for Heathrow. What a tragedy it would be if such a body were not able to claim assistance under this scheme because of the Minister’s insistence on the three-year rule.
Lastly, the Southside young leaders academy, no doubt doing extremely valuable work to encourage the next generation of leaders—perhaps, for a similar organisation in Chelsea and Fulham, the hon. Member for Chelsea and Fulham might be the most appropriate person to champion that next generation of wannabe leaders, expressing concerns to the Minister about the three-year funding rule. A series of organisations—small charities perhaps registered for gift aid already but not necessarily with three years of claims in place—could, with a more generous set of eligibility criteria, benefit from the scheme; because of the sub-section as drafted, however, they stand to lose out on the possibility of up to £1,250. Given the scale of the concern that we in opposition have had played back us, although I am sure that by now Government Members are familiar with it as well, I urge the Minister to think again about what he can do to make this aspect of the eligibility criteria less onerous.
I have drawn the attention of the Committee to what the NCVO said, but the Charity Tax Group has also made its concerns clear. Helen Donaghue, the director of the Charity Tax Group, at an evidence session last week, said that she would like to see the three-year rule changed so that, for example,
“smaller and newer charities could be encouraged to take advantage of this new provision.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 17, Q31.]
Cath Lee, chief executive of the Small Charities Coalition, shared worries about not only the matching issue, which we discussed earlier, but the three-year provision, which is a real concern for smaller charities.
In addition to the NCVO, the Charity Tax Group and the Small Charities Coalition, other representatives of the charities sector have been equally concerned about the scale of what will now be required to get access to the scheme under the three-year gift aid claims rule. Again at an evidence session, John Low, the chief executive of the Charities Aid Foundation, said:
“The Bill now requires charities accessing the scheme to have been claiming gift aid for three years”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 46, Q77.].
Similarly, Caron Bradshaw, the chief executive of the Charity Finance Group, noted that this part of
“the eligibility criteria will rule out the very charities that I think this was intended to reach out to in the first place—those very small, local groups”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 47, Q77.]
that we are all familiar with and that struggle to get sufficient funding from the different income streams available to them. Her concerns were particularly striking, because she emphasised that the majority of her members are large charities—the smallest having a membership of 100,000 people and the largest being the Wellcome Trust—but that she was concerned to ensure that the smaller community charities should benefit from this scheme in a way that at the moment they will not be able to.
Mr Robertson, you were not here this morning, but we dwelt on the problems facing parent teacher associations, highlighting the fact that only 16% of PTAs are registered for gift aid. The hon. Member for Stafford rightly encouraged all Committee members—and the whole House, I assume—to push for more PTAs and small charities to register for gift aid. However, if subsection (1) remains in the Bill, the concern is that even if our efforts were successful, small charities would still not get access to funding under the scheme for at least another three years and potentially for four years, depending on when in the tax year they sought to register.
We gave the example of Eton, which is registered for gift aid at the moment and, as my hon. Friend the Member for Kilmarnock and Loudoun said, has a huge capacity to help people claim gift aid. It is one charity that is benefiting from the scheme, but 84% of PTAs—organisations that seek to serve our communities and help bring in extra resources to make the journey through primary and secondary school that little bit easier for our young people—are not registered, and they are not likely to be able to claim under the scheme, because they do not meet the three-year rule.
Does my hon. Friend share my concerns that from the statistics we have heard, 65,000 organisations claimed gift aid last year, but a far higher number are registered for it? The Institute of Fundraising has suggested that the figure may be around 100,000. As the Bill requires charities to have claimed for three years, there may be a number of charities that have perhaps only claimed once, or that have lapsed and may not be eligible for the scheme if they have not claimed for three of the past seven years. That would rule out a significant number of charities.
My hon. Friend makes an extremely helpful intervention by pointing out the recent comments by the Institute of Fundraising. I draw the Committee’s attention to the fact that there are about 163,000 charities registered with the Charity Commission, but there are many others that do not have to register with that organisation. I understand that Lord Hodgson estimates that there are approximately 350,000 charities in the UK, the vast majority of which will not be able to benefit from what is effectively a small grants scheme from the Treasury, because of the extremely restrictive three-year gift aid claims measure.
It strikes the Opposition that, notwithstanding the requirements relating to gift aid and their eliminating a whole series of charities from potentially accessing the scheme, the three-year rule is particularly pernicious, in that it would prevent the participation of many charities, PTAs and Scout groups. I am sure, Mr Robertson, that you will be particularly interested in the relatively low level of registration—just 52%—of many Scout groups in Scotland. Some 48% of Scout groups in Scotland will not be able to take advantage of the Bill, and not only because they are not registered for gift aid; even if, through an intervention by you, the hon. Member for Stafford or Her Majesty’s Revenue and Customs, they started to register for gift aid now, because of the three-year rule that the Minister has so far insisted needs to stay in the Bill, they would not have access to the Treasury’s small grants scheme until the end of the current Government’s term.
This morning, I was encouraged by the fact that the hon. Member for Congleton took the opportunity to put gentle pressure on the Minister. It was heart-warming to see, if I may say so. We sensed that the hon. Member for Portsmouth North shared one or two concerns about the Bill, and we know that the hon. Member for Stafford has one or two. Given the scale of concerns about the three-year rule, I hope there will be some equally heart-warming interventions—not only from the hon. Member for Congleton but from the hon. Members for Stafford and for Portsmouth North—to try to persuade the Minister, if not today then certainly between the end of Committee and Report stages, to exercise his influence in the Treasury and persuade the Government to re-write this part of the eligibility criteria. The Minister tempted me with an offer to join him in Bromsgrove at an event that he is hoping to organise for his constituents. I worry that he will not get the positive reception that he deserves at such a gathering, unless he can show that he has exercised his influence in the Treasury and amended this unnecessarily pernicious part of the of the eligibility criteria.
I am attracted to the possibility of travelling with the Minister. However, we would have to go in standard class; I do not know whether he would be up for that. Nevertheless, I urge him for his own sake, well in advance of that January meeting, to look again at the clause. The Institute of Fundraising is clear that this is potentially a big problem for many worthy charities that could benefit under the scheme.
It is a pleasure to serve under your chairmanship, Mr Robertson.
Clause 2 contains restrictions that seem out of proportion to what we are trying to achieve. Those restrictions are not applied in other respects to much larger organisations that gather more money and simply want to use the gift aid system. The inclusion of such provisions underestimates the degree to which many small organisations will struggle to meet the “three years out of seven” provision, for example, which applies after they have already registered for gift aid. At that point, they must operate the gift aid system for three years and make a claim, which might prove difficult for some, depending on the nature of their fundraising in a particular year and how organised they are in beginning to work the gift aid system, even if they register for it. The provisions require organisations to operate the gift aid scheme for three complete years from setting up and operate it for three of the last seven years. Although some organisations may do everything efficiently and effectively in their first three years—they may set themselves up, get signed up and start collecting money via gift aid, and then show that they had made three years of claims—and do it at least in year four, for others it may take longer, because in their first three years they may have had other things to think about as they set up, with committees and training and learning about how to do things, and may only hear about the new system as they get going. So it may be two or three years into their existence before they begin to operate gift aid, and then they would have to do so for three years.
In some cases, people may be waiting for assistance for which the Bill should provide. Everybody here agrees that it is good to encourage small organisations to collect money and to encourage donation, but the first time some of them may be able to claim some of this money could be five, six or seven years into their existence. For new organisations that are just getting off the ground and trying to build up the service that they are providing, whatever their charitable purpose, additional help may be particularly important in those early years, because they have to build up a local reputation for themselves, build up the nature of their work and get more people involved who may be willing to give more money. Indeed, charities often have to show the kind of work that they are doing in order to encourage people to start donating.
For many of those organisations, there is already a lot to do without having to get completely signed up for this scheme. Yet this is the very time when, if they have managed to secure donations—perhaps of less than £5,000, so they may not get the full payment, even if they were collecting moneys—getting some extra money in those early years could make the difference. It could get them going and functioning well, and enable them to become more self-supporting. It seems odd that we are piling difficulty upon difficulty.
I do not know whether my hon. Friend has had the chance to reflect on the evidence from Kevin Russell, who is the technical director for Stewardship. In his evidence, in column 10 of the Official Report last week, he talked about the difficulties that non-conformist churches might have in persuading people to set up new churches. They engage in something called “church planting”. The three-year rule would be a disincentive for those newly planted churches to go independent, because they would have to wait so long to access the potential £1,250 under the scheme.
Indeed. That is an example from an organisation that, were it setting up something new, would have a certain amount of support from elsewhere. They would have the difficulty of not being able to make claims under the scheme, but, in terms of learning about it, they are probably slightly better placed than some of the even more independent, smaller organisations, and genuinely local organisations that have been set up to fulfil some local need that people have identified. A lot of good will and hard work goes into this sort of voluntary work.
My hon. Friend is making an important speech. Do Mr Russell’s comments not have further significance because he was one of the Government witnesses invited to appear before the Committee? If one of the Government’s own chosen witnesses has serious concerns about how the organisations in his care may suffer as a result of the three-year rule, does she agree that the Minister should take even greater cognisance of that?
The Minister should not just take cognisance of that; he should respond in light of the evidence that was given across the board—the verbal and written evidence that we have received and the discussion that has taken place in the voluntary sector. The only real reason constantly being given for ignoring all that is that we are trying to drive out fraud, which just seems extreme. Again, I hope that the Minister will look at the whole thing and decide whether, in his barrier of requirements that an organisation is to meet to allow their small donations to be topped up in such a way, all the elements are necessary. At the moment, other than perhaps the matching one—I was pleased to hear the Minister rolling back a little on that—the Government are still keeping all the others in place. It seems unnecessary to make them all apply.
To say that organisations have to be in existence for three years to prove their bona fides is one thing but, on top of that, there is the requirement to have had the three out of seven years making applications for gift aid. Why do we need all those requirements? Even if it were felt that we need to have some monitoring and control, and confidence that the organisation is bona fide, the Government have put in place something that is over-elaborate for the purpose that it will serve.
My hon. Friend makes a good point about the number of anti-fraud elements under the Bill. Does she remember the question asked by the hon. Member for Brentford and Isleworth at column 20 of the record, pressing the head of policy at the National Council for Voluntary Organisations on the three-year issue and whether she thought it was worth while? The head of policy made it clear that she thought that there was a reason to link the scheme to gift aid, but said that she was not sure how much additional protection the full three years provision builds in. Surely that is an important point of which the Minister should be aware. The checks that HMRC does through the linking to gift aid tend to be far more at the beginning of the process than two or three years down the line.
I agree with my hon. Friend that it is important to listen to the evidence given by an organisation that is working constantly with large and small charities to help them get off the ground. They need a great deal of help. The organisation is aware of the challenges that can be presented by such a system. The last thing we want is to put off people from accessing the scheme and, indeed, put them off being active in their communities and being part of such organisations. Management committees of charities sometimes find it difficult, especially when they are getting off the ground, when they are faced with a whole plethora of requirements. People will step away from such a regime. I have seen it happening in organisations in my constituency. People are quite enthusiastic to start with and like the idea, but when faced with far too much organisation and bureaucracy, they just say that it is not for them. It is hard to sustain the committee of a new charity. Everyone knows just how difficult it can be to urge people to become involved.
We do not want to put people off. If we were dealing with much greater sums of money, the case could be made for such an elaborate system. That is not to say that small amounts of fraud do not matter, but when dealing with such issues there must be proportionality—and that seems to be absent from the Bill.
I wish to make a few remarks about the additional bureaucracy that meeting the eligibility criteria would place on small community-based charities. We all support the principle behind the Bill, but the bureaucracy involved is not inconsiderable. It is almost impossible to get through in charitable trusts and administering charities anyway. As my hon. Friend the Member for Edinburgh East said, such organisations already have to struggle. In the evidence we heard last week, someone referred to using a hammer to crack a nut, and I want to make the Minister aware of how difficult the bureaucracy around charitable trusts can be.
I know from bitter experience that such cases are sometimes impenetrable. I remember starting work many years ago as a new assistant director in a north-east local authority and someone walking into my office and handing me—along with the curriculum review, the strategy for planning school places, the child protection review and all kinds of other important pieces of work—three large boxes marked “charitable trusts”. I subsequently learned that every new assistant director for the past 20 years had been handed those boxes and told to get on and sort it out, and I really did try. When I unpacked the boxes, I found charitable trusts going back 50, 60 or 70 years that were linked to schools and areas of the curriculum that were long gone. I particularly remember one called the Captain Carver Trust—it is imprinted on my heart—which awarded an annual scholarship for temperance studies for the best boy at Bede grammar school in Sunderland, who then went on to university. Captain Carver was a young man who, like many others, was killed at the Somme in the first world war, and his family left a large capital sum in trust to his memory at his former school.
I really tried with that one, but my difficulty was that Bede grammar school—the wonderful Victorian building, covered in ivy, still exists just off the dual carriageway on the way into Sunderland from Durham—had become a co-ed sixth-form college many years previously. Legislation has overtaken the trust, and it is not now possible or moral to award a scholarship to the best boy, excluding all the excellent girls, and temperance studies is no longer part of the national curriculum—if it ever was. The nearest subject that I could find was RE, although I got bids from those teaching citizenship and other related subjects. I talked to the trustees and governors of the sixth-form college, who were understandably desperate to unlock the money to support brighter but poorer students. I also talked to the charity commissioner and to the council’s legal department. They all wanted to help, but nobody knew how to unlock all that money. I made some progress, but not enough. When the next assistant director started work, I packed it all up and handed it on to them.
That is just a demonstration of how difficult and impenetrable such things can be. I had neither the time nor the resources to deal with it properly. The problem was that there was a huge amount of money locked up in that one trust—and I had about 30 or 40 of them in the three boxes—and I could not unlock that money at all. If that is multiplied by the 152 local authorities and by the many schools in this country with similar charitable trusts containing lots of money that they cannot unlock, we could just about pay off the deficit.
The hon. Lady is making an interesting point. Bureaucracy is a major concern to many small charities. However, I am not sure about the point that she is driving at, because is it not an argument for this precise scheme, in that it will not pile bureaucracy on to a small local charity in the way that an open or closed grant programme would?
I have to disagree with the hon. Lady. The new scheme will place additional bureaucracy on small local community charities that do not have the capacity to deal with it. That is the problem. I just do not understand why the Government are seeking to make this already worryingly complicated area yet more complex.
A series of charities have made clear just how difficult it would be if this subsection were enacted. Here is a promising ministerial career just beginning and possibly set to be almost irrevocably damaged, because the Minister will be known as the Minister for charitable red tape.
I agree with my hon. Friend, but I do agree with the direction of travel of this piece of legislation. It is good in intent and I would not like to see it bogged down or to see charities not take advantage of it simply because they did not have the capacity to do so.
Finally, I want to make a personal plea. I talked this morning about the Dipton memorial fund in my constituency. We also have a small charity called the Cobweb orchestra. It exists to provide instruments and tuition to anyone who turns up. My husband has turned up a couple of times as he has quite a lot of musical talent. I always intend to take my violin out and go along one day because I have really good technique—but not an ounce of talent. It takes membership fees and collects small donations. Every penny of that money goes back into instruments and booking rooms and so on.
The Cobweb orchestra contacted me following the Chancellor’s announcement. It is concerned that as a result of the changes in gift aid it will lose £9,000. I am not entirely sure that it will, but because of the complexities I have not been able to get an answer. It is more than a year since I wrote to the Treasury. I have had one holding response and nothing more. I am abusing my position here on the Committee to ask the Minister whether he or one of his staff would meet with me and someone from the Cobweb orchestra to go through these concerns.
My hon. Friend will know from reading the exchanges last Thursday that we discussed the huge workload pressures HMRC will face as a result of cutting 10,000 jobs and the piling on of an additional scheme. The fact that she has not had a proper reply may be just one small symptom of that. Perhaps Ministers should have been a bit more sympathetic to our first group of amendments.
I welcome you to the Chair, Mr Robertson. It is a pleasure to serve under your chairmanship. We have had a good debate so far on the clause. The hon. Members for Edinburgh East and for North West Durham made good contributions, and I will try to answer some of the points they raised in the next few minutes. It is clear that like everyone in the Committee they are passionate to ensure that we can do as much as we can to help small charities.
As the hon. Member for Harrow West set out, the third group of amendments seeks to challenge the three-year eligibility criteria for charities wishing to claim under the small donations scheme. This was another of the key issues raised by charity sector representatives during Tuesday’s evidence session and it is a point that has been raised with me by stakeholders directly. So it is right that we spend some time discussing this provision in the Bill. Let me start by setting out how this element of the clause is intended to work.
Eligibility for the scheme is defined by reference to gift aid claims made in the past by the charity. For a charity to be eligible to claim the top-up payment, it must have a minimum three-year track record of successfully claiming tax relief under gift aid. This is one of the qualifying conditions the Government set out when the Chancellor first announced the scheme in Budget 2011. There are essentially two components to this test. If a charity or community amateur sports club is to be eligible to take part in this scheme, it must have been recognised as a charity or CASC for tax purposes for three consecutive tax years. Secondly, it must have made gift aid claims in at least three of the previous seven tax years without a gap of three tax years between claims.
I heard the hon. Gentleman argue, as several have before him, that this means that new charities or charities that have not claimed gift aid in the past are unable to access the benefits of this scheme until they have built up a track record. The new scheme, however, is based on cash donations, unlike the gift aid scheme, and there are very limited donor records with a cash system, if any at all. That means the scheme will inevitably attract fraudsters. As with the matching rule set out in clause 1, the three-year qualifying period is an essential part of the scheme to ensure that it is adequately protected against fraud. HMRC sees a high number of cases of fraud every year. As we have discussed, a minimum of more than £10 million has been detected and stopped in each of the last two years.
During a series of efforts by the Opposition to draw the Minister’s attention to the Awards for All scheme, he has consistently failed to explain why the eligibility criteria for that scheme, which result in the same low level of fraud as under gift aid, could not be used for the Treasury small grants scheme. It is time that he explained why such a draconian set of eligibility criteria are required under this scheme, when other Departments are happy to allow much bigger sums to be allocated to small charities with less onerous eligibility criteria.
It is rare that I am able to say that I speak with authority on an issue in this House, but I was the director of two lottery distributors. I was bought in to crisis-manage the Community Fund and then set up the Big Lottery Fund. I have devised programmes like Awards for All and Heroes Return. I support the measure because the bureaucracy for the charity is less than any grant scheme—even the light-touch grant schemes of Awards for All. There are strict criteria, but the actual effort that a charity has to go through to make use of the scheme is much less than even those light-touch grant schemes.
I am grateful to my hon. Friend for helping to answer the point made by the hon. Member for Harrow West.
Requiring charities to operate gift aid correctly for the three tax years before claiming payments under the new scheme means that the charity will have been subject to HMRC checking and tests. Therefore, HMRC can be more certain that the charity is bona fide for the purposes of claiming under the new scheme and that it is able to operate gift aid without significant errors.
One of the hon. Gentleman’s points, if I understood him correctly, was that charities will not be eligible unless they claim gift aid each year. To clarify, that is not exactly how the system will work. It recognises that many charities, although they are registered for gift aid with HMRC, do not claim each and every year. Charities do not need to claim for consecutive years; they need to claim for at least three years in the past seven, as long as the gap between claims is no longer than two years. Of the 100,000 or so charities that are registered with HMRC, 65,000 will claim in any particular year, but many will not claim every year. It is not the same 65,000 each year. Charities have an ongoing relationship with HMRC.
While the initial checks HMRC undertakes when a charity first registers for gift aid will enable some fraudulent charities or individuals to be caught, they will not catch all cases; nor will that enable any judgment to be made about a charity’s ability to claim gift aid correctly.
Why does the Minister think it reasonable that a charity that registers for gift aid can secure gift aid moneys in its first year of claims, but a charity that seeks to access funding under the top-up scheme has to wait at least three, possibly four and perhaps even seven years?
There are several reasons. One key reason why a charity can start to benefit as soon as they register for gift aid is that gift aid claims require information from the donor including their name, their address and a statement that they are a UK taxpayer. There is an audit trail, so when HMRC wants to audit claims from a charity it can follow that paper trail. Those requirements make it harder for fraudsters to take advantage, whereas in the small donations cash scheme, the cash element and the fact that no details are collected about the donor make it easier for bad people to take advantage if they are determined to do so.
HMRC needs to build knowledge of a charity and the people managing it to check that it is claiming gift aid correctly and to follow up on any causes for concern. There have been calls, as we have heard today, for a reduction in the three-year period, but reducing the lead-in time would increase the cost of the scheme and inevitably increase the amount of money that is paid in fraudulent claims.
No, I see as one of the key benefits of the clause the fact that it helps to tackle fraud. In the evidence sessions, a tapered eligibility period was suggested, in which either the limit to which a charity can claim would increase gradually, or the ratio at which the charity had to match gift aid to small donations would change over three years. I have looked at those options, and I think that they would introduce additional costs to the scheme and change the calculations of potential fraud. Most importantly, they would add complexity because a charity would have different limits or matching levels in different years. The charities involved will be new to gift aid and getting used to the process for the first time, and it would be counterproductive to add another level of complexity by introducing a variable donations limit. We want the scheme to be simple to operate for charities, and we want it to enable them to claim easily alongside gift aid.
Has the Minister given any thought to the fact that there may well be some charities that do not have a gift aid record but can none the less demonstrate that they are bona fide charities that would meet the criteria in other ways, rather than new charities? I think that the Minister is concerned about new charities springing up and making fraudulent claims. Did he consider whether there is some way of allowing such bona fide charities to benefit from the gift aid top-ups sooner?
Clearly, when such issues were raised in my meetings with charity groups and other interested parties, we considered other ways of dealing with the matter. For the reasons I have set out, however, we need a system that balances the interest of the taxpayer with our desire to help charities.
Under this group of amendments, the hon. Member for Harrow West again referred to parent teacher associations, and he mentioned a certain public school. I think he was trying to make the contrast that it is easier for some schools or PTAs than others to raise money through gift aid or to benefit from this scheme. I draw his attention to a document published last year that he may not have seen. It is from HMRC and was specifically designed with some of his issues in mind. I do not know whether he has had a look at “Gift Aid and Payroll Giving”, but I will let him have a copy afterwards. It is detailed and easy-to-follow guidance that was developed by HMRC last August. I believe that, when it was published, it was roundly welcomed by schools and other organisations for its conciseness and for helping many more PTAs to claim. It is the kind of document that I shall distribute on my charity day in Bromsgrove in January, and I encourage the hon. Gentleman to hold his own charity day in his constituency and to take advantage of such documentation.
The hon. Member for North West Durham made some good points. She specifically asked about the Cobweb orchestra, but clearly I do not have the details of that case at hand. She mentioned the figure of £9,000 in lost claims, but I cannot go into that. She asked whether it would be possible to have a more detailed discussion, and I am happy to ask HMRC officials to meet her, if that would prove helpful.
In summary, I hope that I have clearly set out why it was necessary to include the provision. We must protect the Exchequer from fraud, but it is also important to protect the charitable sector’s good name from those who wish to exploit it. I agree with hon. Members that a balance needs to be struck between preventing fraud and allowing access to the scheme for bona fide charities. We have found that balance, and I therefore ask the hon. Member for Harrow West to withdraw the amendment.
As the Minister said, we have had a good debate. In particular, my hon. Friend the Member for Edinburgh East drew attention to the pressure on trustees and those who serve on charity boards in relation to fundraising and to how, notwithstanding the comments of the hon. Member for Portsmouth North, charities will sense an extra burden should they want to register for gift aid and take advantage of this scheme.
My hon. Friend the Member for North West Durham gave the specific example of the Cobweb orchestra, and it was good to hear the Minister commit his officials to meeting her. My hon. Friend’s broader point was that small charitable organisations, such as the ones she mentioned, stand to lose out by not being able to access up to £1,250 under the scheme because of the harshness of the particular subsection.
I have emphasised the concerns of a whole series of representative bodies that speak for small and, indeed, larger charities about the subsection that we are seeking to delete. I did not mention—perhaps I should—the concerns of that excellent organisation Community Matters, which specifically focuses on the needs of small charities in our communities, or of the National Association for Voluntary and Community Action, which is another of what are termed infrastructure bodies for small charities. NAVCA also believes that existing charities that are already recognised by HMRC for tax purposes, by being registered for gift aid, should be able to receive payments for small donations without having to wait three or four years.
Our concern, which I have to say the Minister has not yet satisfied, is that the provision has been written into the Bill to create a cap on the level of expenditure on the scheme. If the Minister had been quite transparent and open about that, we would have at least understood that point. He did not convince us why a three-year waiting period is needed to get access to the small grants scheme but not for payments under the gift aid scheme. We will reflect on his arguments. I will not press the amendment, but I look forward, Mr Robertson, to catching your eye on amendment 21, which is a humble effort to get the Minister out of the hole he is in on this issue. I beg to ask leave to withdraw the amendment.
Suggests an alternative criteria to make it easier for smaller charities to be eligible under GASDS.
As I said, this is a probing amendment that offers the Minister a more reasonable set of hoops that charities might be asked to jump through to secure the objective of minimising fraud in the scheme. It would insert two requirements into the eligibility criteria.
I accept that
“paragraph 4 of Schedule 6 to the Finance Act 2010”
sounds fiendishly complex but it is the fit and proper persons test which is part of the work that charities already have to do to achieve gift aid registration. Unlike the horrendous 60 pages of guidance or the 80 web pages of guidance my hon. Friend the Member for Leeds East drew to our attention which one has to go through to claim gift aid in the first place, the fit and proper persons test requires much less guidance. If one uses the model declaration, there is only a two-sided form to complete.
The fit and proper persons test is a concept that charities are familiar with. Many organisations recognise that it is perfectly reasonable to require the management of a charity to demonstrate its capacity to manage the charity’s finances and activities in a fit and proper way. We seek to go a little further, understanding the scale of the Minister’s slightly disproportionate concern about the level of fraud in the charity sector compared with other parts of the economy where Ministers do not seem quite as bothered as he has been. To give the Minister and colleagues on the Government Benches some comfort we also suggest that charities should have to have completed at least one annual return and update to the Charity Commission to secure access to the scheme.
The Charity Commission is a body that is familiar to the vast majority of charities, whether or not they have to secure registration or not. Deservedly or not, it is a less intimidating body than HMRC. It is seen as being slightly friendlier. The merits of our humble efforts are that they would reduce the bureaucracy and the number of hoops that charities would have jump through to gain access to the scheme, and allow more small charities to claim. The Minister said that there was unlimited money to claim from under the scheme for an unlimited number of charities. If that were indeed the case—there is some scepticism among Opposition Members that that is so—the hon. Gentleman ought to be at least sympathetic to the amendment.
I remind members of the Committee of the example of the parent teacher association that is not registered for gift aid, but is registered with the Charity Commission. Such a position potentially offers a greater incentive for parent and teachers, such as the Friends of Newton Farm in my constituency. Britain’s best primary school is not registered for gift aid at present, but it makes a difference to the surrounding community. It is not registered for gift aid, unlike Eton, which was the provocative contrast that I sought to present to Government Members. Our proposal would reduce the level of unfairness that Ministers seem willing to tolerate, so that charities can gain access to the small amount of money that they can claim under the small grant scheme.
I humbly present the amendment to the Minister. I accept that it is not 100% perfect, but I suggest it as a potential route for him to explore—if not today, then between the end of Committee stage and Report when, hopefully, he will return with far less pernicious eligibility criteria, which I hope are based on amendment 21.
Amendment 21 sets out alternative qualification criteria for charities under the new scheme. It is something that we have examined; we considered alternative measures to stop fraud under the scheme. We wanted views on the issue from the charitable sector so we asked in our consultation earlier in the year whether there were any other proposals. However, no workable ideas were suggested. While I thank the hon. Gentleman for his proposal, it is something that we have considered already and, unfortunately, it would not fall into a workable category. I shall explain why.
Not all charities are required to register with the Charity Commission or its devolved counterparts. I remind members of the Committee that the regulation of charities is a devolved matter and that the Charity Commission is responsible only for regulation in England and Wales. The devolution of responsibility means that there are different criteria throughout the United Kingdom for the regulation of charities. There are different definitions of “charity”, different thresholds for registration and different requirements for the filling in of annual returns.
In England and Wales, for example, the smallest charities are not required to register with their regulator. All charities with income below £5,000 are exempt from registering. That means that the very smallest charities—those that could benefit the most from the Bill—would be excluded from the scheme, and I am sure that that is not the intention of the hon. Member for Harrow West. That group of charities can register voluntarily with the Charity Commission but, for many charities, the process of registering with the Charity Commission and completing an annual return would be more time-consuming than registering with HMRC for gift aid. That option also brings with it the benefit of gift aid income for that charity.
That example also highlights the fact that the amendment would not work, as it would fail to take account of the devolved nature of charity regulation. As drafted, it would only allow charities that are required to register with the Charity Commission of England and Wales to claim under the small donations scheme. I am not sure whether the hon. Members for Edinburgh East and for Foyle support the amendment, but, if they did, and it was actually made, it would mean that the charities in the devolved nations that they represent would not be able to benefit from the Bill.
If we were to expand the provision to tie the eligibility to the other devolved regulators as well, the differences in regulation would mean that there would be different treatment for charities operating in different areas of the UK. That is an impractical suggestion that would only increase complexity and the administrative burden for charities, HMRC and the charity regulators. That is not the intention of the Bill. I maintain that, for the reasons I set out in the debate on the previous set of amendments, it is necessary to keep a link between the gift aid scheme and the new scheme to prevent widespread fraud. I therefore ask the hon. Gentleman to withdraw his amendment.
I am grateful to the Minister for taking the time to consider our amendment. We wanted to suggest to him a one-year time frame for which charities would have to wait in order to access the scheme, hence the suggestion of one annual report and/or one annual update having to be filed. We recognise that the Minister wants to see charities undergo an initial inspection, hence the reference to the fit and proper person test.
We have not heard, in either the Minister’s answer to this amendment or his answer to the previous set of amendments, why there is a requirement to have claimed gift aid in three out of the previous seven years. Why not two years? Why not one year? I hope that the Minister will reflect on that, because, as a number of hon. Members of all parties on the Committee will recognise, there has been consistent concern about the three years within seven requirement in clause 2, and the way in which it will significantly deter small charities from registering for gift aid. The Minister says that one of the potential benefits he sees coming from the Bill is that it will encourage more of the huge number of charities in this country that are not currently benefiting from gift aid to register. I suspect that, were there no three years within seven requirement, he would be more likely to achieve his objective of more charities registering for gift aid.
That was the essential purpose behind this humble proposal—a change in direction from the Minister and his team. I recognise the drafting complications that he quite properly set out in his answer. I will beg leave to withdraw the amendment, but, in so doing, I urge the Minister to use the time between now and the end of Committee to reflect on whether three years in seven are required, as opposed to one year or two years.
I note that my hon. Friend is minded to withdraw the amendment, which I would have been happy to support, although it would also require some consequential amendments, as the Minister has pointed out. The relevant committee in the Northern Ireland Assembly has said that it would be minded to support a legislative consent motion for this Bill in the Assembly, but has also made it clear that it would want that legislative consent to extend to considerable amendments, including a number that clearly relate to what he has been talking about.
I welcome the comments of my hon. Friend and I am grateful for his bringing in that perspective from the Northern Ireland Assembly. I welcome his willingness in principle to support our amendment. Given my hon. Friend’s interest and the specific concerns of Northern Ireland, I hope that the Minister will take an additional interest in the possibility of shifting down from a three years out of seven requirement to perhaps a two or one year requirement. Nevertheless, because of the clear drafting issues with the amendment, which we knew about when it was tabled, I beg to ask leave to withdraw the amendment.
Again, this is a pair of probing amendments. We want to probe the Minister’s intentions regarding any penalty that charities might incur. Ministers clearly think that there is a considerable risk of fraud, but many charities worry that the level of bureaucracy and the potential for mistakes in the claims that they make is equally considerable. This is an opportunity for Ministers, whatever they and their Back-Bench colleagues may think about how easy it is to register for gift aid and therefore to benefit from the new scheme, to reflect on the fears of many charities that HMRC may penalise them at the merest hint of a mistake. The Committee may know that that is an unfair or unwarranted fear, but it is real and has been reflected in our discussions with a series of organisations.
I also gently encourage the Minister to consider the discussions that the Committee will have when discussing clauses 6 to 9 and the whole new concept of “community buildings”, which is completely unfamiliar to the vast majority of charities and charity lawyers. It is novel and potentially very complex. We know that there are no new resources within HMRC to dedicate to explaining the small grants scheme. The Minister may well be influential enough—albeit in his Back-Bench capacity—to persuade HMRC to come along to his charity day. I suspect that it would be unreasonable to think that 650 such charity days with HMRC in attendance could take place before the scheme is established. While charities in Bromsgrove may benefit from coming along to his session with HMRC officials, it is simply not realistic to think that there will be enough time before the scheme comes into existence for every charity that may benefit to have enough exposure to HMRC properly to understand all the different elements of the eligibility criteria, particularly the new concept of “community buildings”.
The Minister may want to dwell on the language that he has been using in the course of our debates. Every speech has been peppered with references to fraud and the need for anti-fraud measures. As I have made clear, we all want fraud to be prevented as far as possible. However, an unintended consequence of the Minister’s speech being littered with references to fraud in the charity sector and among organisations claiming gift aid is that it may further underline the worry that if people get a claim wrong, they will be considered to be putting in a fraudulent claim.
I give one further example of the potential for concern among charities. In his evidence to the Committee on Tuesday, the Minister talked about the existence of the £50 note in a bucket collection, and how, if there was such a note in a bucket collection, it would probably have come from just one person and would clearly not be eligible. I do not know whether it is the Minister’s intention for HMRC to carry out spot checks on whether £50 notes are being counted, but there is the possibility that a group of people might make a collective donation with a £50 note after pooling their £10 and £20 notes. In that case, it is not clear whether that would be regarded as eligible to be counted towards the £5,000 maximum sum—a small example of the potential for charities’ concern.
By the same token, some sharp-eyed person who has taken a great interest in what our Committee has been deliberating on might spot a £50 note and think, “I know that £50 donation will not be eligible under this scheme. What if, in its place, I put two £20 notes and a £10 note?”
My hon. Friend raises an interesting conundrum for the Minister to ponder. We might think that these series of questions are relatively minor in the great scheme of things for a small charity to reflect on. However, if a charity is worried that if it makes a mistake it might be regarded as having put in a fraudulent claim and, as a result, feel the full force of HMRC bearing down on it, then this set of probing amendments is an opportunity for the Minister to provide reassurance. It is an opportunity for him to explain the process, both internal and external, when charities believe they have made an honest mistake and HMRC perhaps believes differently, and to resolve those concerns. I look forward to the Minister taking advantage of this opportunity to set those understandable concerns at rest.
Some bits of the Bill are complex. May I assure the hon. Member for Harrow West, who is just leaving his place, that the Church of England, which after all has 16,000 churches and therefore 16,000 charities, is perfectly confident that it will be possible to write guidance that will make it very straightforward for charities to comply with this? After all, by definition, every charity that is involved with this scheme is already registered for, and working with, the gift aid scheme. This provision just builds on that scheme, and we ought to try and remember that it seeks to enhance it.
Every Sunday, I have a bit of a crisis. My crisis on a Sunday comes at that bit where the clergyman says, “Peace be with you”. The crisis is, do I shake hands? How many hands do I shake? Do I kiss my wife? If I kiss my wife, do I have to kiss other members of the congregation? Do I have to kiss the vicar? At the same time, I have to fill in my gift aid form, because that is usually when the collection comes around, or near enough, with the offertory hymn.
As a consequence, a lot of people put money in that would have counted towards gift aid if it had been in the gift aid envelope.
In the Bill, we seek to build on what already exists. There is a danger that Opposition Members are trying to complicate what the Treasury is generously doing, which is giving charities another £100 million on the gift aid scheme that they would not otherwise have got. Organisations up and down the country will benefit considerably.
The Church’s working relationship with HMRC has been, and is, extremely good, and we have always found HMRC to be positive and understanding when talking to us to resolve problems. That has been the case both for individual churches and for the Church Commissioners, which, after the Wellcome Trust, is the second largest charity in the country.
The hon. Gentleman speaks with great knowledge about matters that concern churches, but does he accept that the points we have been making mainly relate to small charities, which do not have the same structures or practices as churches? Some of the difficulties that we are expressing particularly concern small charities, which desperately need the money in the same way as his own church congregation and others would.
In today’s world of websites, it is easy to put perfectly straightforward guidance on websites for anyone to see, so I do not think we should allow ourselves to be daunted by the thought that charities will not be able to grasp the legislation. We should keep on saying, “Thank you very much!” to the Treasury for giving an extra £100 million to charities, which is very welcome.
The Opposition have set out what they describe as a probing amendment to see how strict the scheme should be in excluding charities that have incurred penalties from HMRC. It may help if I start by setting out our rationale for including that provision. If a charity makes a false or erroneous claim for gift aid or for the top-up under this scheme, it may be charged a penalty. If that happens, the charity will cease to be eligible for a top-up payment under the scheme for the tax year in which the false claim for gift aid or top-up payment was made, and for the next two years.
We have introduced that condition because we need to apply rules that will encourage good compliance by charities. The condition will ensure that the scheme is operated properly and is protected against abuse. If a charity does not comply with the gift aid rules, it is reasonable to assume that it may not be complying with the rules of the gift aid small donations scheme. HMRC does not hand out penalties lightly; only where a charity has not taken reasonable care, or where there is deliberate error in claiming, will a penalty be issued. Our experience of the gift aid scheme is that many penalties are suspended, because we take into account the fact that a charity’s breach of the rules may have been completely unintentional. HMRC’s intention in imposing penalties is to encourage good compliance, and a suspended penalty may be enough to achieve that.
The hon. Member for Harrow West mentioned the example of someone who made a cash donation of a £50 note, and he asked what would happen if, despite the charity’s best efforts, HMRC picked up on that and said that it was clearly more than £20 from a single donor. That is not the kind of thing for which HMRC would impose a penalty. It is really about what HMRC would consider serious non-compliance with the regulations.
Perhaps with hindsight, the £50 note was a poor example, but surely the Minister must recognise that the complexity of the provisions concerning community buildings is a real concern, given their novelty for many charities. How will he ask HMRC to handle mistakes that are made by small charities wanting to take advantage of this scheme if they fall foul of the various parts of the community buildings provisions?
Clearly, charities that wish to take advantage of the community buildings provisions would need to be more involved with the eligibility criteria. The key aspect of doing that properly for the charity is the guidance that will come when this Bill is passed. I mentioned earlier the excellent example of good guidance by HMRC for schools related organisations. I would expect similar high quality guidance to come about as a result of the Bill. When the Bill becomes law and charities start to take advantage of its provisions, perhaps in the first year issues will be drawn out and so guidance can be updated. For charities that remain unclear, even with the guidance, or which have a unique issue that concerns them, there is an HMRC helpline. Many larger charities have a relationship with HMRC. Even where they do not there is a helpline they can call to get immediate clarity.
Perhaps the document that the Minister has mentioned a couple of times will be to small charities what IPSA’s guidance is to Members of Parliament: extremely helpful, but nevertheless having somewhat complex rules. Although it is incumbent on all of us to do our level best to adhere to IPSA’s rules, every Member will recognise the scope for mistakes and error and for reputations to suffer as a result. There are already 80 pages of website guidance on adherence to gift aid, and there is more guidance to come from the Minister. He must accept that there is the potential for real mistakes and genuine misunderstandings to occur. I ask him again: how will he handle such mistakes?
I think the hon. Gentleman would accept that no matter what system is used, there will be eligibility criteria. There will be hurdles for charities to clear to fulfil those criteria. There is always the potential for a charity to make a mistake. When mistakes are made there needs to be some kind of penalty process. The key is that that penalty process, operated in this case by HMRC, needs to be proportionate and to take into account the individual circumstances. I think I have given enough examples during the debate of how HMRC intends to approach this and how it will deal with gift aid. Over £1 billion is claimed in gift aid each year but only a handful of penalties are handed out. Many of those are suspended penalties. That is probably a good guide to the number of penalties that may result from this new scheme.
It occurs to me that sometimes, decisions have been made about the standing of a body that has been established as a charity and has taken money as a charity. Atlantic Bridge was one example. As I understand it, it was the Charity Commission that said it was not sure that the purposes for which that charity was spending money were appropriate. I am not sure what subsequent action HMRC took in relation to gift aid or anything else.
More currently, the Minister mentioned the differences between the different charity commissions and the different statuses for charities. There is controversy in England at the minute about the Charity Commission’s attitude to the Plymouth Brethren. I am not sure that that attitude is replicated in Northern Ireland. Is HMRC saying that it decides which churches are charities and ignores the Charity Commission, or does it at any stage take account of the Charity Commission’s concerns about the standing or conduct of charities?
I thank the hon. Gentleman for clarifying his question. HMRC follows the definition of charities under the Charities Act and it will apply its own understanding of that Act. There are charities that claim gift aid or get other benefits from HMRC that are not registered with the Charity Commission. Equally, I think I am correct in saying that there are charities registered by the Scottish authorities under Scottish law that are not necessarily recognised by HMRC as charities. There is no plan to change HMRC’s approach to working with charities and how it recognises them.
HMRC pays some £1 billion each year to charities under gift aid, as we have heard, and such large amounts of money inevitably attract fraudsters.
Before the Minister moves on to another issue, I want to probe the point he made on mistakes and penalties. What are the most common mistakes that charities have made in relation to gift aid, which may well be replicated and should be highlighted so that people do not make them?
If the Minister does not want to give examples now—and in the light of his interest in holding conferences for charities, so they can understand all the different tax reliefs and their eligibility under this scheme—will he ask HMRC to organise a number of similar one-day meetings in the major urban centres, in order to allow members of representative bodies that are concerned about this clause to come to one of those sessions? In those sessions, HMRC could set out in detail how to access the scheme, who will benefit, common mistakes that charities make when they claim for gift aid and things to avoid when they are trying to understand whether they are eligible for the community buildings part of the Bill. I fear that the hon. Member for Banbury is a little complacent about the scale of difficulty people face in trying to access 80 pages of website guidance and the numerous other bits that are coming through. Why not, as part of reassuring charities on this issue, commit to a series of one-day conferences to allow HMRC to explain in detail what is required?
My hon. Friend the Member for Banbury is many things, but he is anything but complacent. I cannot stand for that kind of attack on my hon. Friend and his reputation.
The hon. Gentleman asked about HMRC working with charities to ensure that charities can take full advantage of the scheme, which we would all want to see. He may be interested to know that HMRC is planning a four-stage publicity campaign over the next few months to alert charities to the new online gift aid system and the small donations scheme. As well as media publicity, HMRC is planning to write in the new year to every charity that has claimed gift aid within the past few years to tell them about the online gift aid system and the new scheme. In addition, it has regular meetings with charities as well as with some of the representative bodies. I am sure the hon. Gentleman welcomes that engagement.
That is indeed welcome. However, if the Minister will forgive me, that point does not answer my question. He is happy to divert the attention, time and effort of one or two HMRC officials to go to Bromsgrove. I gently encourage him to hold that event not there, but in Birmingham, so that a far bigger range of organisations can come along. He appeared willing to encourage HMRC to go to an event that I might organise. Rather than my organising it, why does HMRC not organise big events in London, Glasgow and other big urban centres?
The Bill is complex. Government Members may not think it as complex as we have suggested, but many small charities have understandable concerns. Why not have a small number of set-piece occasions, at which any of those involved with small charities who are worried about what they have to do under the legislation could speak in person to a representative of HMRC? The Minister will make that happen for charities in his constituency. Why will he not make it happen for many other small charities?
I have already explained HMRC’s engagement process with regard to the new online system and small charitable donations, and that process is extensive. HMRC has an outreach team that travels, on an ongoing basis, throughout the UK and covers many issues, which will clearly include this new Bill.
The hon. Gentleman mentioned the event that I plan to hold in Bromsgrove, which is a funding day—targeted for January—to encourage charities to make the most of the help available. He asked why HMRC does not do the same in other constituencies. It is an event that I will plan as a constituency MP. HMRC may or may not be part of it; that is a decision for HMRC to make. If he wants more such events to take place, I suggest that he take up that idea with the leadership of his party, as many coalition Members have done, and encourage Labour Members to hold similar events, which I am sure would go down well in their constituencies. If he is a bit stuck for ideas on how to organise such events, I am happy to arrange a session with the aides in my parliamentary office, so that he can work-shadow them for the day and learn about how to help charities.
On fraud, HMRC pays about £1 billion a year to charities under the gift aid system, and such a large amount inevitably attracts fraudsters who will, and do, attack any payment system, looking for weaknesses, so we have to minimise our vulnerability and protect the taxpayer. In earlier debates, we amply covered the need for measures to protect the scheme against fraud, so we do not have to go through that again. I hope hon. Members agree that we cannot leave the Exchequer open to fraud and abuse. It is our duty to protect taxpayers’ money and ensure that it is spent correctly. I therefore ask the hon. Gentleman to withdraw the amendment.
I am grateful to the Minister for taking the time to respond to several of the concerns that small charities have asked us to mention. Nevertheless, I am struck by the sense that it would be worth while for him to encourage HMRC to organise a number of set-piece occasions at which it could go through the details of the Bill. He made me an incredibly generous offer, and it would indeed be an act of charity were I to come and offer counselling to his staff, but I am happy to contemplate that in the round. The Minister has made several useful points, as a result of which I beg to ask leave to withdraw the amendment.
Before we discuss the next amendment, let me make it clear that it is not my intention to call a stand part debate. We have covered the clause fairly well. Having said that, I will show a certain leniency in the next debate if some subjects are raised. If that is all right with everybody, we will carry on.
‘(c) a penalty is not to be regarded as having been imposed if all of the penalty is suspended (or the decision that a penalty is payable is cancelled on appeal); but this does not apply to a suspended penalty that subsequently becomes payable.’.
This amendment provides that a suspended penalty is not to be regarded as imposed for the purposes of the rules about the meaning of “eligible charity” unless it subsequently becomes payable.
I have tabled the amendment in response to worries raised on Second Reading by the hon. Member for Foyle. I am grateful to him for his constructive comments on the detail of the Bill. I explained in the debate on the previous amendment that the condition has been introduced because we need to apply rules that will encourage good compliance. It will ensure that the scheme is operated properly and is protected against abuse. If a charity does not comply with the gift aid rules, it is reasonable to assume that it might not be complying with the rules of the gift aid small donations scheme.
The issue raised by the hon. Member for Foyle on Second Reading was about the possibility of a charity that had a penalty suspended or lifted on appeal being caught by the rule. That was not the intention of the provision so I have tabled the amendment to clarify the position. It puts beyond doubt the fact that the charity’s eligibility will be affected by a penalty only if the penalty finally becomes payable. Proposed new subsection (4)(c) sets out that a penalty suspended or cancelled on appeal, unless it later becomes payable, will not affect eligibility.
I hope that the proposal reassures members of the Committee that we do not intend to exclude those charities that have had penalties suspended or removed on appeal, and I hope that they will support the amendment.
I will listen with particular interest to what my hon. Friend the Member for Foyle has to say when he catches your eye, Mr Robertson. My initial instinct is that the amendment would be helpful. I welcome it, albeit with the caveat that I shall listen with interest to my hon. Friend.
The amendment underlines the complexity implicit in the way in which the Bill is drafted. It would be good to hear from the Minister in his winding-up speech a couple of real-life examples of when the proposal might be helpful. I understand that the amendment has been drafted as a result of worries expressed by my hon. Friend the Member for Foyle on Second Reading. Nevertheless, it would be good to hear some worked-through examples. Perhaps the Minister has asked HMRC to convince him that the measure is worthy of being accepted.
It would be helpful if some of the 150 members of staff that HMRC will have in its charity section—the charity outreach team—organised several meetings that small charities can attend, at which they can properly understand the ins and outs of the scheme. It is really not good enough for the Minister to say that he is happy to make representations to HMRC that some of its staff should attend a meeting in his constituency. He has a responsibility to make sure that small charities throughout the country have the opportunity to benefit from face-to-face meetings with HMRC experts. Perhaps that argument is why we are the party of one nation, and his party can no longer claim that mantle. I look forward to listening to my hon. Friend the Member for Foyle.
I welcome the amendment and the terms in which the Minister has addressed it. I am a politician who can take yes for an answer, and the Government have taken on board a legislative issue that I raised. The gift aid scheme’s penalty provisions, as couched in the Bill, are perhaps too sweeping. They are not qualified in any way that would allow for the fact that a penalty could be suspended or overturned on appeal, and the Minister’s amendment sensibly corrects that.
I credit the Government with listening to what some of us said on Second Reading, and I encourage the Minister to listen to some of the other practical concerns and criticisms that many of us are expressing about some of the other provisions. The amendment is about tidying up and smoothing aspects of the Bill that could otherwise be jarring and difficult for charities, and I hope that the Minister will extend the same consideration in some other areas.
I welcome the kind comments made by the hon. Member for Foyle, and I thank him again for raising his very good point on Second Reading, as that enabled us to act.
The hon. Member for Harrow West asked about the kind of errors that could lead to penalties. They are the common mistakes that are made in the gift aid process: computational errors, failure to obtain valid gift aid declarations and late claims—those made out of time. The amendment seeks to ensure that if HMRC believes that one of those, or another, mistake might have been made—sometimes, unfortunately, they are intentional acts rather than mistakes—but on further investigation realises that something was incorrect or that there was bad information, it is able to relieve the penalty in a way that does not affect the charity or its ability to claim under the terms of the Bill.
The hon. Member for Harrow West also mentioned publicity. The HMRC publicity campaign for the gift aid online system and the scheme that we are discussing today is extensive. Writing to every charity that has claimed gift aid in the past three years is an excellent way to advertise the scheme, and to invite charities to ask questions. If the shadow Minister believes that HMRC should consider going to certain parts of the country—perhaps he has his constituency, or elsewhere, in mind—either he, as the local Member of Parliament, or a local charity or group of charities, is at perfect liberty to invite it to go there or send representatives. The decision would be HMRC’s to make.
The Minister said that HMRC plans to write to charities that have previously applied for gift aid. As I understand it, part of the point of the top-up grant scheme, as Ministers have described it, is to encourage more charities to apply for gift aid. Therefore, what publicity campaign and level of correspondence will there be for the almost 300,000 charities that have not claimed gift aid in the past year? Will they be written to by HMRC? Surely they should be.
The hon. Gentleman is right. Part of the scheme’s attraction is to get more charities interested in gift aid and therefore in this scheme. If they are not currently on HMRC’s database, clearly they will not receive a letter, but hopefully they will be attracted by the extensive media campaign that will accompany this measure.
HMRC has various sources for getting information on charities. The Charity Commission for England and Wales, the Charity Commission for Northern Ireland and the Office of the Scottish Charity Regulator are all sources. There are also other representative bodies of charities. We saw some of them in the evidence sessions. There are many others. We can rely on HMRC’s working with them to ensure that all the charities that can benefit from the scheme have the opportunity to do so.